VantageScore - FICO is losing its place to the new kid on the block

Tough competition has begun between VantageScore and FICO. Let’s see who wins the final battle.

Ever since Fair Isaac Corporation (FICO) lost the lawsuit to VantageScore in 2010, the new kid on the block has been gaining popularity amongst consumers. FICO filed a lawsuit against VantageScore to stop them from using their trademark 300-850 credit score range. Fortunately or unfortunately, FICO lost the court battle to VantageScore, who is giving a tough competition to them since 2007.

VantageScore - A tough competitor

FICO has become synonymous with the term ‘creditworthiness’. Today, almost 10 billion FICO scores are sold to financial institutions for deciding if a line of credit should be given to a potential customer.

VantageScore is the child of 3 main credit bureaus in the nation - The TransUnion, Experian and Equifax. As per VantageScore Solutions, LLC, nearly 6 billion VantageScores were sold in the nation. This figure is double the number of VantageScore used in 2014 and six times the number in 2012.

Six billion VantageScore were used by lenders, and that speaks a lot about VantageScore’s growing popularity. It’s a huge achievement.

As per the statistics, VantageScore is used by 7 of the top 10 biggest financial institutions in the country. It is used by 2000 lenders in the country. But still, we will consider VantageScore as a new kid on the block since FICO is used by 90 of the top 100 financial institutions. Besides, there is another factor to consider. It’s yet unknown how many of these 6 billion scores were used by lenders for determining the creditworthiness of potential consumers. It’s still uncertain about how many consumers got these scores from free credit-monitoring services such as Quizzie or CreditKarma.

FICO is clear about their statistics and performance. They are very sure that 10 billion scores were used by lenders to make their final lending decisions. So, they’re still at the top.

Strategies to win battle

VantageScore 3 omits collection accounts with zero balances and gives less penalty to people with delinquent medical debts. This was a tough challenge for FICO. But, they accepted and answered this challenge with the release of FICO 9. In this new scoring model, $0 balance debt collection accounts are ignored. Plus, it also gives less importance to delinquent medical debts while calculating credit score.

FICO’s next challenge for VantageScore was FICO XD score. This scoring model is slightly different in the sense that it includes cellphone and utility bill payment history, which is ignored in regular FICO score.

The ultimate battle

The ultimate battle is, which of these scoring models will discover the best way to offer scores to consumers without any credit score. As per the financial regulators, 26 million consumers are regarded as ‘credit invisible’. Some consumers don’t have a credit file, whereas others have too many delinquent debts on their credit report.

Only time will tell if VantageScore can defeat the reigning king FICO score in the future. Until then, both are giving tough competition to each other.

Moral of the story

Ultimately, you have a good credit score and poor credit score. It doesn’t matter much if you have a VantageScore or a FICO score. Agreed that both the scoring models are different. But they don’t vary too much.